An electric oil pump jack extracts petroleum from the New Harmony Oil Field in Grayville, Illinois, U.S., on Sunday, June 19, 2022. (Photo: Luke Sharrett/Bloomberg) Equities in Japan, South Korea and Hong Kong edged higher, as stocks in Australia headed down. Mainland China markets are shut for a holiday. Futures contracts for the S&P 500 and Nasdaq 100 were little changed.
US Treasuries were similarly flat in Asian trading after selling off on Thursday, increasing yields to levels not seen since September. The move was reflected in an index of dollar strength, which was little changed on Friday. Australian and New Zealand yields rose early Friday.
West Texas Intermediate and Brent crude struggled to find direction after each rose more than 5% to a one-month high on Thursday. Earlier gains came after puzzling comments from President Joe Biden, who told reporters the US was discussing whether to support potential Israeli strikes against Iranian oil facilities.
Investors are concerned that, should Israel strike critical Iranian assets, the Islamic Republic will lash out and escalate the conflict, dragging in more countries and potentially disrupting global energy shipments. Israel said it bombed more than a dozen Hezbollah targets in Beirut on Thursday.
“The market fear is that there could be supply disruptions coming out of Iran,” said Tai Hui, chief Asia market strategist for JPMorgan Asset Management, on Bloomberg Television. “Demand for oil should remain healthy, but at the same time the risk to the supply side is very much there.”
The yen strengthened and the pound was stable after falling sharply against the dollar the prior day on signs the Bank of England may cut rates more aggressively. South Korean won weakened as local markets reopened after a second holiday this week.
Amid all the geopolitical uncertainty, investors are looking for further signals on the health of the US economy, with the monthly payrolls report due on Friday. The unemployment rate is forecast to hold steady at 4.2% in September while payrolls are expected to rise by 150,000.
“If the unemployment rate ticks up, I wouldn’t be surprised that markets would shift back toward expecting 50 basis points and then it is a question of how the Fed may react,” Kallum Pickering, chief economist at Peel Hunt, said on Bloomberg Television.
Other economic signs showed robustness in the US economy. The Institute for Supply Management’s index of services posted its best reading since February 2023, ahead of Wall Street estimates. Applications for US unemployment benefits rose slightly last week to a level that is consistent with a limited number of layoffs. Continuing claims, a proxy for the number of people receiving benefits, were little changed from the previous week.
The readouts “were both solid in September,” according to JPMorgan Chase & Co.’s Abiel Reinhart. Initial jobless claims “on balance continue to look quite low, which is a good sign for the job market,” he wrote in a research note.
In Asia, data set for release includes S&P Global PMI figures for Hong Kong, inflation in the Philippines and retail sales in Singapore.